Ascena Retail Group (ASNA) - Get Report, owner of the Ann Taylor and Lane Bryant apparel chains, is reportedly discussing a filing under the bankruptcy laws with lenders after its business was disrupted by the coronavirus pandemic.
Shares of the Mahwah, N.J., company were at last check off 17.3% to $2.28.
The Chapter 11 filing could come as soon as July, Bloomberg reported, and would allow the company to keep some of its brands operating while it seeks to sell others.
Ascena is considering selling three brands in a court-supervised sale process, including Catherines, while keeping Ann Taylor and Loft as part of the company when it emerges from bankruptcy, Bloomberg said, citing people with knowledge of the situation.
Ascena’s lenders are starting confidential talks on a deal that would see their holdings exchanged for a majority stake in the reorganized company.
The majority of Ascena’s about 2,800 stores remain closed. All its shops shut in mid-March due to the outbreak. The retailer began to reopen locations in early May as state authorities lifted restrictions.
Last month, Carrie Teffner, interim executive chairwoman, said in a statement that “Covid-19 has significantly disrupted our business."
"Despite aggressive actions to preserve liquidity, the pandemic has significantly reduced our earnings and cash flow, resulting in increased levels of debt and deferred liabilities," Teffner said.
"With retail stores making up the majority of our revenue and cash flow, the uncertainty created by covid-19 requires us to evaluate all options available to protect the business and its stakeholders.”
Prior to closing its stores on March 18, Ascena said that store revenue in fiscal 2020 made up about 60% of total revenue.
The company continued its e-commerce business and posted a 9% increase in demand during April, compared with April 2019. Third-quarter total revenue tumbled 45% from a year ago.
Ascena had been having financial trouble prior to the coronavirus outbreak. In September management discussed divesting Catherines and Lane Bryant.
"Like all companies today, Ascena is operating in an unprecedented and highly dynamic environment and the company continues to take steps to reduce expenses and optimize its liquidity position," a company spokesperson said. "We are evaluating all options available to preserve our ongoing operations and we will reassess our position on all of these decisions on an ongoing basis."